Ask the Scholar

{
    "localId": "1535284",
    "label": "1976/09/17 - Frank Zarb and Mobil Oil Officials",
    "core": "doc",
    "dtoType": "document",
    "citationUrl": "https://catalog.archives.gov/id/1535284"
}

{
    "id": "1535284",
    "sourceUrl": "https://catalog.archives.gov/id/1535284",
    "contentType": "document",
    "title": "1976/09/17 - Frank Zarb and Mobil Oil Officials",
    "citationUrl": "https://catalog.archives.gov/id/1535284",
    "collections": [
        "James M. Cannon Files (Ford Administration)",
        "James Cannon's Meetings Files"
    ],
    "subjects": [
        "Arab Boycott",
        "Legislation"
    ],
    "iiifBase": "https://s3.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0039/635913/1535284.pdf",
    "thumbnailUrl": "https://s3.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0039/635913/1535284.pdf",
    "largeImageUrl": "https://s3.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0039/635913/1535284.pdf",
    "imageCount": 1,
    "hasImages": true,
    "source": "import",
    "hasTranscription": false
}

{
    "url": "https://catalog.archives.gov/id/1535284",
    "naId": 1535284,
    "coverageEndDate": {
        "logicalDate": "1976-09-30",
        "month": 9,
        "year": 1976
    },
    "coverageStartDate": {
        "logicalDate": "1976-09-01",
        "month": 9,
        "year": 1976
    },
    "levelOfDescription": "fileUnit",
    "recordType": "description",
    "ocrSource": "nara-archive"
}

{
    "seq": 1,
    "pageIndex": 0,
    "type": "document",
    "url": "https://s3.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0039/635913/1535284.pdf",
    "mediaId": "014ab8b77e8c66eb",
    "ocrText": "The original documents are located in Box 62, folder \"1976/09/17 - Frank Zarb and Mobil\nOil Officials\" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 62 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nVP P HAS GENATE\nREFURD is LIBRARY\nASKED you +\nM EE\nJan\n8ml\nMontery Missery fin\nMEMORANDUM\nOFFICE OF THE VICE PRESIDENT\nWASHINGTON\n8Am\nSeptember 14, 1976\nMEMORANDUM FOR: Jim Cannon\nFROM:\nSusan Herter\nFor the reasons discussed on the phone,\nthe Vice President feels it would be better if you\nand Frank saw them.\nThe request came to me through\nEd Hennelly, Mobil, whose telephone number is\n212/883-3828 or 3827.\nAttachment\nFORD is LIBRARY 938870\n09/506\nMEMORANDUM\nOFFICE OF THE VICE PRESIDENT\nWASHINGTON\nSeptember 13, 1976\nThe Vice President\nRe: Mobil Oil\nThe Chairman of the Board of Mobil\nOil (Rawleigh Warner) and the President of Mobil\n(William P. Tavoulareas) are extremely anxious to\nsee you in connection with their recent conversations\nwith Arab leaders and their concern about the impact\nof a boycott on the U. S economy.\nThey called me because of Chris's\nformer association with Mobil. I checked with\nCaptain Howe who thinks it is a domestic matter.\nI checked with Jim Cannon who thinks you should\nsee them if they feel they have something important\nto say to the Vice President.\nIf you do see them, Jim feels that\nhe and Zarb should sit in on the meeting.\nJan vp Okay to set up\nGo Foulet Not interested Cound Susan R. FORD\nGERALD LIBRARY\nRIBICOFF AMENDMENT\nSections 1061-1067 of the Tax Reform Act of 1976, as passed\nby the House and the Senate (the \"Ribicoff amendment\"),\nwould deny foreign tax credits and impose other tax penalties\non any American company which \"participates in\" or \"cooperates\nwith\" an international boycott.\n1. Purpose of Provisions Seems to be to Stop U.S.\nCompanies from Doing Business with Arab Countries -\nnot to Protect U.S. Persons from Religious\nDiscrimination\nAlthough drafted in general terms, it is clear that the\nRibicoff amendment's intended effect is to penalize and\nharass U.S. companies trading with Arab countries.\nSome supporters of this legislation claim that their aim\nis to protect U.S. persons and companies from religious\ndiscrimination that prevents them from participating in\ninternational business. The amendment goes much further\nthan this, however, and may severely penalize American\ncompanies doing business in the Arab world, and will be\nseen by the Arab countries and their friends as a U.S.\nembargo of the Arab world.\n2. Prohibited Conduct Broadly Stated\nThe Ribicoff amendment defines what constitutes \"participa-\ntion in\" or \"cooperation\" with a boycott in extremely\n- 2 -\nbroad terms. A person is subject to the tax penalties\nif he agrees:*\n(A) To refrain from doing business with a boycotted\ncountry, its companies or nationals;\n(B) To refrain from doing business with a U.S. person\nwhich does business with a boycotted country, its\ncompanies or nationals;\n(c) To refrain from doing business with any company\n(whether U.S. or foreign) whose ownership or\nmanagement includes persons of a particular nation-\nality, race or religion;\n(D) To refrain from employing persons of a particular\nnationality, race, or religion; or\n(E) To refrain from shipping goods on carriers owned,\nor leased, or operated by persons who do not\nparticipate in or cooperate with the boycott.\n3. Ribicoff Provisions - Even as Amended by the Conference -\nWill Hurt U.S. Companies Doing Business in the Arab\nCountries\nThe Conference Committee appears to have intended to revise\nthe original Ribicoff proposal to permit U.S. taxpayers to\ncontinue to carry on business with Arab countries in a\nmanner required by the laws and administrative practices\n*Statutory language in summary form.\n- 3 -\nof those countries. Unfortunately, the Conference\nadded a Catch 22. It seems that taxpayers may freely\nobey the sovereign laws of an Arab country so long as\nthey do not \"agree\" to obey those laws. Unfortunately,\nthe Conference report states that a taxpayer does not\nhave to \"agree\" knowingly to be in trouble. The tax-\npayer may be held to have \"agreed\" to participate in a\nboycott if he adopts a course of action from which an\n\"agreement\" can be inferred. Obeying local law in a\nmanner sanctioned in one sentence of the Conference\nreport can (incredible as it may seem) be treated as\nevidence of a prohibited agreement under another sentence\nof the report. Thus, it is not clear under the statute\nwhether a taxpayer will be penalized if he consistently\nfails to ship goods into an Arab country on vessels that\nare legally prohibited from entering the waters of that\nArab country. It is not clear whether a taxpayer will be\npenalized for consistently failing to import goods pur-\nchased from a company whose goods cannot be legally im-\nported into a country. It is not clear whether a taxpayer\nwill be penalized if he consistently fails to use the\nservices of a company in an Arab country where the company\ncannot legally perform services.\nUnless the taxpayer is confident that he can sustain the\nproposition that his lawful course of action does not\n- 4 -\nconstitute an unwritten implied agreement to obey the\nlaw, he will find it difficult, if not impossible, to\nundertake operations in Arab countries because he will\nnot know what tax penalties he may incur.\nExamples\nA taxpayer could be penalized for importing into Arab\ncountries goods purchased from non-blacklisted U.S.\ncompanies because the taxpayer failed to purchase goods\nfrom blacklisted U.S. companies or certified that the\ngoods he imported were not manufactured by blacklisted\nfirms.\nA taxpayer could be penalized for importing goods into\nArab countries on U.S. vessels that were not blacklisted\nbecause he failed to import goods into Arab countries on\nvessels that were blacklisted.\nA taxpayer could be penalized for providing services in\nan Arab country with personnel who could get visas to work\nin the Arab country because he failed to employ personnel\nin the Arab country who could not get visas to work in\nthat country.\nSome people believe that the Ribicoff amendment as reported\nout by the Conference Committee reflects the Committee's\nefforts to permit American companies to continue to do\n- 5 -\nbusiness in boycotting countries without prejudice to\ntheir tax position so long as they did not become active\nsupporters of the boycott. However, the language of\nthe amendment, particularly when taken together with the\nCommittee report, leaves American companies in a position\nwhere even if they do not affirmatively support the\nboycott by agreeing to collaborate with it, they must\noperate at their peril because of the risk that they\nwill be held to have made an agreement simply by obeying\nthe local law in conducting their operations.\n4. Penalties are Inequitable Because They Operate Unevenly.\nThe very nature of the approach taken in the Ribicoff\namendment will inevitably mean that different taxpayers\nwill pay vastly different penalties ranging from zero to\nmillions of dollars for the same act. For example, an\nAmerican exporter/importer that willingly agrees to comply\nwith the secondary and tertiary aspects of an Arab boycott,\nbut who sells material on a delivered basis and pays no\ntax in Saudi Arabia, manufactures no goods that qualify\nfor DISC benefits and has no foreign subsidiaries (and\ntherefore no deferral) will incur no penalty from seeking\nout and actively participating in a boycott, whereas another\nAmerican company that has profitable foreign operations or\n- 6 -\nmanufactures American goods for export and sincerely\nseeks to comply with this ambiguous legislation could\nlose millions. Foreign companies, of course, will lose\nnothing; only American companies.\nThe penalties imposed by the Ribicoff amendment are\ncapricious and can have no relation to the offense in-\nvolved. A single act in a single Arab country that is\nheld to be a boycott participation can result in tax\npenalties on all the business of a taxpayer in all Arab\ncountries unless the taxpayer can \"clearly separate and\nidentify\" the different operations of his business both\nwithin and without the boycotting country and clearly\ndemonstrate non-participation in the boycott. This\nburden of proof may be impossible to meet regardless of\nthe taxpayer's innocence.\n5. Reporting Requirements are Excessive\nThe reporting requirements of the Ribicoff amendment\nplace a tremendous burden, both legal and administrative,\non the taxpayer. Under the amendment, a taxpayer is\nrequired to file a report if it or an affiliate (domestic\nor foreign) has operations (profitable or unprofitable)\nin or with any country (or its nationals) which appears\non the Treasury's boycott countries list OR in any country\nnot on the list (or with its nationals) which the taxpayer\n- 7 -\nhas reason to know imposes a boycott. Thus, a company\nwith worldwide operations may well have to file reports\ndetailing its operations throughout the Arab world. The\nstatute might even be interpreted as requiring reports\non the dealings of a company or any of its affiliates\nwith individual nationals of a boycotting country who\nwere located inside or outside that country. The tax-\npayer may be required to conduct an annual worldwide\nreview of, and report on, the business transactions of\nits affiliates, including transactions that were carried\nout for business reasons that could not possibly be\nrelated to any boycott.\n6. Amendment is Retroactive in that Tax Penalties Apply to\nBusiness Done Before its Effective Date.\nThe penalties contained in the Amendment go far beyond\nanything which has previously been contained in U.S. law.\nIt is possible that taxpayers will lose millions of dollars\nrelated to past activities which were legal and required\nby the laws of the foreign country in which the activity\noccurred and also legal under U.S. law simply because the\ntaxpayer is determined to have \"agreed\" to engage in certain\nprohibited activities after enactment of the law. An\n\"agreement\" in November 1976 can generate penalties in\nrespect of operations conducted in January 1976.\nSept. 17, 1976\nSeptember 16, 1976\nPENDING BOYCOTT LEGISLATION\nAmendments to Export Administration Act\nThe Export Administration Act expires September 30, 1976.\nIt covers many U.S. export matters other than the boycott\nsubject.\nThe Senate Bill (S.3084) to extend that Act contains the\nStevenson boycott amendment, and has been passed by the Senate.\nThe House Bill (H.R.15377) to extend the Act contains the\nBingham-Rosenthal boycott amendment, and was granted a rule\nSeptember 15 by the Rules Committee, sending it to the House\nfloor.\nThe correct action is to preserve the existing law. Regu-\nlations of the Commerce Department under the Export Administra-\ntion Act already provide that U.S. exporters cannot take \"any\naction\" that supports a boycott if it \"discriminates\" against\nU.S. citizens or firms on the basis of race, religion or na-\ntional origin.\nThe public's impression is that the pending Bills are\nsimilarly addressed to preventing discrimination. But they\nare in fact written to accomplish many other surprising re-\nsults. If enacted, the Bills could accomplish a fundamental\nchange in this nation's foreign relations and economic policies\n- 2 -\n-- a potential result little noticed to date but one which\nwould be dramatic indeed if it should occur. That development\nwould be destructive of basic interests of the United States\nfor several reasons.\nFor example:\n-\nThe sponsors would have us believe their purpose is to\nprevent exclusion of any U.S. company from the rapidly\ndeveloping opportunities for export trade with Arab\nnations. The Bills, however, could very well end all\nsuch trade -- so that not only the U.S. firms sought to\nbe protected but all others as well would be pre-empted\nby foreign competitors.\n-\nThe sponsors claim the U.S. has no jurisdiction over ac-\ntions by other sovereign nations to boycott a foreign\ncountry -- \"a legitimate type of economic warfare under\ninternational law and practice\" (in the words of the House\nCommittee report). Yet the Bills plainly take sides on\nthat issue, disabling U.S. companies from doing business\nin Arab countries because of the boycott.\n-\nThe sponsors claim the U.S. has no jurisdiction over ac-\ntions by other nations to boycott foreign companies. Yet\nthe House Bill would make it illegal for U.S. companies\nnot to do busines with any foreign company by reason of\n- 3 -\nthe boycott -- even though religious or other discrimination\nwas not involved and even though the U.S. company could\nnot in any case have used the productsof such foreign com-\npany.\n-\nThe Bills are a radical departure from a fundamental U.S.\nbusiness/legal principle -- that any company is free to\nselect those with whom it does business (except for anti-\ncompetitive agreements not to deal or refusals based on\nreligious or other discrimination). Under the Bills, a\ncompany involved in Arab-nation business would have a\npublic-utility type obligation not to refuse any business\noffer if that offer cannot be accepted by reason of the\nArab countries' boycott requirements (and even though such\nan acceptance would be a futile gesture).\n-\nThe Bills thus would make it a crime under U.S. law not\nto do what certain Arab countries make it impossible to\ndo -- e.g., import prohibited goods into those countries,\nuse prohibited vessels for imports to and exports from\nthose countries, and send crude oil from those countries\nto restricted destinations. The only alternative would\nbe for U.S. companies to cease doing business with the\nArab countries.\n-\nFor these reasons, the Bills could cast doubt on the\n- 4 -\nability of U.S. manufacturers to fulfill U.S. Government\ncommitments for the sale of arms and spare parts to Arab\nnations.\n-\nThe Bills represent, in the final analysis, a clear effort\nto impair the developing economic interdependence and\nother ties between the U.S. and the Arab nations. If this\nstep were ever to be taken, it should be consciously de-\ncided after thorough and open debate on that issue -- not\naccomplished overnight by bills featured as \"anti-discri-\nmination\" legislation.\n-\nThe Bills assume retaliation by Arab nations is unlikely\n-- but to enable U.S. companies legally to deliver tech-\nnology and goods, they would drop the boycott. In view of\nthe substantial U.S. dependence on Arab oil, this would be\nan enormous gamble where the stakes include the continued\nfunctioning of the U.S. economy and the well-being of its\npeople. In fact, the Arab nations could easily utilize\nthe technology and goods of non-U.S. firms in lieu of eli-\nminating the boycott restrictions.\n-\nEven the ability of foreign subsidiaries of U.S. companies\nto continue in business would be jeopardized. The House\nBill (and perhaps regulations under the Senate Bill) would\ncover such affiliates, so that U.S. criminal penalties\nwould attach to actions taken by U.S. affiliated foreign\n- 5 -\ncompanies even though those actions are required by the\nlaws of the sovereign nations where they do business.\nUnder those circumstances, it follows that the Arab\nnations would require local affiliates of U.S. companies\nto obtain necessary equipment and supplies from local\nnational companies or from foreign competitors -- and in\ncomplying with that requirement the foreign affiliate\nmight well be claimed under the Bills to have violated\nU.S. criminal law.\n- All the foregoing comments pertain to the Bills without\nregard to any act of discrimination whether on the basis\nof race, religion or national origin. Indeed, the true\nnature of the legislation is highlighted by the fact that\nthe Senate Bill does not even prohibit such discriminatory\nactions as such.\nThese and other consequences of the legislation are shown more\nclearly on the attached summary, which cites the precise lan-\nguage of the Bills.\n1.\nProhibited Actions\nRemarks\nSenate Bill\nHouse Bill\n\"any action with intent to comply\n- Any action to comply with boycott restrictions is pro-\nwith or to further or support\" a\nhibited by the Bill (even without regulations). For\nboycott\nexample, compliance with Arab restrictions on import\nof goods or use of vessels.\n- Compliance with Arab crude destination restrictions\ncould be said to be prohibited. Hence, if American com-\npanies import Arab crude solely to the U.S., they could\nbe said to be in violation.\n- Commerce Dept. must issue regulations defining prohibited\nactions \"including\" (but not necessarily limited to) those\nspecified in the House Bill (listed below). (House Com-\nmittee Report says specific prohibitions are only \"illus-\ntrative\".)\n\"refusing to do busi-\n\"boycotting or refraining from\n- On imports to Arab countries, it could be a violation not\nness with any other\ndoing business with any U.S.\nto purchase goods from blacklisted U.S. companies or to\ndomestic concern\" pur-\nperson\" with intent to comply\ncertify that goods were not manufactured by blacklisted\nsuant to boycott re-\nwith boycott\nfirms -- even though failure to purchase from them is not\nquest or requirement\nbased on religious discrimination and even though such\ngoods if purchased could not be imported into the Arab\ncountry. (Therefore, it could be illegal to import goods\npurchased from non-blacklisted companies.)\n- Could not use non-blacklisted vessels on Arab imports or\nexports since this involves not using blacklisted U.S.\nvessels. Thus, there might be no way to ship crude to\nthe U.S. or goods to Arab countries.\n- Could apply to crude destination restrictions, since oil\ncompany must say \"no\" to U.S. company who seeks crude for\ndirect shipment to Israel.\n2.\nProhibited Actions\nRemarks\nSenate Bill\nHouse Bill\n- Expands far beyond sponsors' expressed intent to pro-\n-\n\"refraining from doing business\ntect U.S. companies,\nwith the boycotted country\" with\nintent to comply with the boycott\n- Crude destination restrictions could be violation since\ncompliance is action related to boycott limitations\n(including limits on crude to South Africa or, during\nembargo, to U.S.). Crude exports to U.S. would involve\ncompliance with destination restrictions, hence such\nexports could be illegal.\n- On Arab imports, certification of non-Israel origin or\nfailure to purchase Israeli goods (which can't be im-\nported) would be violation. Thus, no goods could be\nimported into Arab countries by U.S. firms.\n\"refraining from doing business\"\n- Possible violation if Israeli firm requests crude pur-\nwith \"any business concern\" of\nchase for direct shipment to Israel and is denied.\nboycotted country with intent to.\ncomply with the boycott\n- Possible violation on Arab imports if Israeli vendor is\nturned down, and maybe from mere certification of non-\nIsraeli origin or that goods not manufactured by black-\nlisted vendor.\n- Again, goes beyond protection for U.S. companies.\n3.\nProhibited Actions\nRemarks\nSenate Bill\nHouse Bill\n\"refraining from doing business\"\n- Goes beyond trying to protect U.S. companies. Apparently\nwith any person who does business\nan effort to protect companies all over the world who\nwith boycotted country or with\nmight be blacklisted because of Israeli business involve-\nnationals of that country, with\nment.\nintent to comply with boycott\nrequirements\n\"Discriminating\" against U.S.\n- \"Religious\" discrimination not a major problem; \"nationality\"\npersons on basis of religion,\ncould be. How can U.S. company refuse to comply with legal\nnationality or national origin\nrequirements that employment preference be given to local nationals,\nor that nationals of certain other countries be excluded?\n\"furnishing information\"\nSimilar, but only if information\n- Potentially troublesome, especially if Arab country dis-\non any persons' race,\nrelates to employees, etc., of\nallows Israeli citizens (\"nationality\").\nreligion or national\na U.S. company; includes infor-\norigin if requested for\nmation on 'nationality\"\n- Would an individual visa applicant commit an illegal act\nboycott purpose\nby submitting information requested by the Government as\nto religion or nationality?\nFurnishing information on any\n- Would prevent a blacklisted company from furnishing infor-\nbusiness relations with boy-\nmation on itself necessary to get off the blacklist.\ncotted country or firms\nRemarks\nProhibited Actions\nSenate Bill\nHouse Bill\nPersons subject to prohibi-\nPersons subject are any \"U.S.\n- Inclusion of foreign subs, especially in Arab countries,\ntions are \"domestic con-\nperson\" which includes for-\ncould be very difficult since they must comply with laws\ncerns.\"\neign subsidiaries.\nof sovereign nation where they operate.\nHow can U.S. criminal penalties pertain to actions of a\nforeign-incorporated affiliate governed by local law?\n- Regulations under Senate Bill might also finally define\n\"domestic concerns\" to include foreign subs.\nDoes not apply to shipping\nProhibitions noted above\n- U.S. companies might be unable to import to Arab nations\nrestrictions if \"purpose\"\nagainst refusing to do busi-\nat all since to do so requires non-use of Israeli and\nis not to implement boy-\nness bring in shipping re-\nblacklisted vessels and shipping companies, and refrain-\ncott.\nstrictions.\ning from using those vessels could be illegal.\nCriminal penalties.\nCriminal penalties.\n- Already in the law (for taking boycott action which dis-\ncriminates against U.S. persons on basis of religion. or\nnational origin).\nTreble damages can be re-\n- The wrong way to enforce foreign policy. A field day for\ncovered by any U.S. person\nplaintiff's trial bar.\n\"aggrieved\" by a prohibited\naction.\n5.\nProhibited Actions\nRemarks\nSenate Bill\nHouse Bill\nReports of requests for boy-\nSame\n- Presents difficulty since \"how\" requests are publicized\ncott compliance, to Commerce\ncannot be controlled. Mere request for formalistic\nDept., must be public.\ncertification of non-Israli origin on Arab imports would\nbe characterized in media as \"cooperation\" with boycott.\nWould unnecessarily aggravate U.S./Arab relations.\nMEET WITH FRANK ZARB\nFriday, September 17, 1976\nRe: Mobile Oil\nMr. Tavoulareas\nJames Riordan\nJ. E. Fowler\n3PM"
}